Sesa Goa rethinks India ops

Grappling with a shut down of its operations due to a mining ban in Goa, India's largest private sector miner, Sesa Goa, has said that it is becoming increasingly difficult to operate in the country.

In an oblique indication, it said that its experience in Africa, where it is opening a mine, has been far better.

The company has been trying to open a mine in Jharkhand for the last nine years with little success so far.

In contrast, it hopes to start operations in Liberia, where it applied for a mining licence two years ago, in 2014, making it the fastest project development in the world.

Sesa Goa is investing $2.4 billion (Rs.12,960 crore) in Liberia.

“Our experience in Liberia has been great. We signed a mineral development agreement with the government which clearly stated what we needed to do and by when and what the government will do,” said PK Mukherjee, managing director, Sesa Goa.

“Our appetite for expansion in India is high but there are issues here. We got a prospecting license in Jharkhand in 2004 but are yet to start mining. At that time they never insisted on value addition... later they did and we signed a MoU. But getting approvals and clearances is a tedious process. So they cancelled the MoU (last year). Now we are waiting to sign a fresh MoU... We have not been able to move much.”

The Vedanta Resources group company owned by Indian-origin billionaire Anil Agarwal, has a peak annual iron ore production capacity of around 19 million tonnes.

But it has suffered the brunt of the mining ban in Goa that the apex court imposed in October, after Shah commission report estimated the illegal mining scam in the state at Rs.35,000 crore.

Its third quarter sales have nosedived 91% and profit has declined 28% this fiscal. The company has stayed profitable only because of its 20% stake in associate oil firm Cairn India.

Top management of the company has already taken a 10-25% salary cut, though the company has not laid off any of its 4,000-odd workforce. It has however warned it may be forced to do so if the Goa ban is not lifted within three months.

“So far we have not touched the employees and workers. The top management including me has taken a pay cut because we can afford to,” Mukherjee said.

“Our cash flow has dried up so we are trying to use whatever liquid cash we have as judiciously as possible. But it cannot go on forever.”